Faculty of Tourism and Hotels

Subject:-
Revenue Management

Submitted to
Dr. Mohamed Kamal

The job Names

- Sources of Revenues in Hotel ‫ أشرقت أيمن أحمد عبدالرحمن‬-1
- How do Revenue managers in ‫ دميانة بشرى حليم عطية‬-2
hotels can maximize revenues?
 1- Introduction to revenue management

What is revenue management in hospitality and hotels?

✓ Revenue Management began in the 1980’s across the Airline Industry.
To optimise financial results, airlines began to use ‘Dynamic Pricing’
where they would set seat prices based on anticipated consumer
demand.

✓ Broadly speaking, Revenue Management is the use of analytical data,

which can help to predict the behaviour of customers, so that product
availability and price can be optimised in order to generate the
maximum amount of revenue possible.

✓ In hotels, revenue management is a commonly used practise to sell

smart. With the right execution, you will sell the right products to the
right person for the right price at the right time through the right
channels with the best commission efficiency. Yield management is
just a small part of Revenue Management.

✓ Revenue management is concerned with optimizing financial

results and is especially popular in industries like hospitality, which
must contend with high fixed costs and a perishable inventory. For
example, hotels have a certain number of rooms and fixed costs which
must be met, regardless of how many rooms are sold.
 2- What are hotel revenues?

Hotel revenues are the income generated by a hotel via all its various
operations and services, including room rentals, food and beverage sales,
event and conference bookings, and other auxiliary services. The total
revenue earned by a hotel is a crucial measure of its financial performance
and determines its ability to cover its costs and generate profits.

3-Why are hotel revenues important for hotels?

Hotel revenues are essential for the survival and growth of hotels. Without
adequate revenues, hotels cannot cover their operating expenses, such as
salaries, rent, utilities, and maintenance costs. Moreover, revenues also play
a crucial role in determining a hotel’s ability to invest in new facilities,
amenities, and technology to enhance its guest experience and stay
competitive in the market.

4- Different Sources of Hotel Revenues

There are several sources of hotel revenues that a hotel can tap into to
generate income. Here are the most common ones:
➢ Room revenue

Room revenue is the income generated by renting out guest rooms in a

hotel. Room revenue is typically the most significant source of revenue
for hotels, accounting for about 70% of their total revenue. Room rates
depend on various factors, such as the room type, location, amenities, and
demand.

➢ Food and beverage revenue

Food and beverage revenue refers to the income generated by selling

food and drinks in a hotel’s restaurants, bars, cafes, and room service.
This source of revenue is highly variable, depending on factors such as
the hotel’s location, target market, menu, and pricing.

➢ Event and conference revenue

Event and conference revenue is the income generated by hosting

meetings, conferences, weddings, and other events in a hotel’s banquet
halls, ballrooms, and meeting rooms. This revenue stream can be highly
profitable, especially if the hotel has a well-equipped and spacious event
space.

➢ Other revenue streams

Other revenue streams may include parking fees, laundry services, spa
treatments, in-room entertainment, and other auxiliary services that hotels
can offer to their guests.
It’s also worth noting that many hotels also rely on rent (to retail outlets),
commissions from third-party vendors (like water sports and tours), and
retail (like gift shops) for additional sources of revenue. While these sources
of revenue technically don’t fall under “ancillary services” in the accounting
books, they’re still worth noting.

5- How do Revenue managers in hotels can maximize

revenues?

1. Understanding Your Market

It's important to make sure you know what the peaks and highs are for the
season. You also need to consider which days of the week remain busy, and
which ones are slower. Knowing the market trend can put you ahead of the
competitor set and help you maximize revenue.

2. Segmentation and Price Optimization

It’s critical to understand the market and know what type of customers are
staying at the hotel. It's also important to figure out who is willing to pay
how much. Here's our guide on this: Identify, Segment and Target your Hotel
Customers
3. Knowing Your Competitors

The competitors in your area are your main rivals. They have the best
opportunities in taking business from you. Hence, you need to familiarize
yourself with their products, pricing and any advantages that they might be
using. It's good to use this information as a benchmark to know what you
need to do better.

To learn more about creating your own hotel competitor set, check out: How
to create your hotel competitive set analysis?

4. Choosing the Right Pricing Strategy

Pricing is the key, and understanding your market and segments helps you
choose the right price points to maximize revenue

Here's a full guide: How to build a pricing strategy for your independent
hotel.

5. Forecasting

In order to understand future demand and set the correct pricing strategy,
you need to have a forecast in place to see what you can anticipate in
specific segments. This helps you prepare for the future. Looking ahead is
key in Revenue Management! Here's everything you need to know about
forecasting.
6. Incentives for Direct Bookings

Direct booking are important in building guest loyalty. You need to make
sure that the customers know they can receive the best price at the hotel
website, instead of using third-party channels where you end up paying
commissions.

7. Monitor the competition

Your comp set should be your guiding force to make decisions about pricing
and to understand how you hold up against other hotels in the same price
range, in the same location and with similar amenities. In revenue
management, it is important to keep an eye on the competition to anticipate
peaks in demand and make strategic decisions about prices. For example,
knowing when your competition is offering deals could be an indicator that
demand is low, so you should follow suit and adjust prices.

8. Know your guests

You know what they say: segmentation in the hospitality industry is key. By
knowing who your guests are and understanding their booking habits, you’ll
be able to better guide the planning and execution of your revenue
management strategy. Segmenting audiences by travel purpose such as
leisure, business, family reunions, family holidays, events etc., will help give
you a better idea of when your guests are more likely to book.
Furthermore, by having clearly segmented audiences, you can then
understand who are your most profitable guest profiles and optimize your
revenue strategy based on this.

9. Direct bookings are gold

Direct bookings are the most profitable types of bookings, with no additional
commissions or costs paid to distributors, which is why having a plan to
obtain direct bookings is a key part of any revenue management strategy. In
order to maximize direct bookings, you may consider creating a loyalty
program or offering discounts or an added bonus for booking directly.

10. Don’t neglect yield management

Yield management goes hand in hand with revenue management, as it

includes the revenue generated through room rates and occupancy. By
optimizing your room prices to suit demand, you can effectively increase
your revenue. Establishing different prices based on occupancy also allows
you to get more per room when demand is higher.
11. Work across departments

Revenue management should be based on a holistic approach; that is to say

that your hotel should work across departments to optimize earnings.
Ancillary revenue from room extras, spa services, restaurant and bars, and
room service can be a great source of additional earnings. Make sure all staff
are aligned on what they need to do in order to play their part in improving
the hotel’s performance.

12. SEO can make a difference

SEO, or search engine optimization, is one of the most under-rated tools to

improve performance. SEO is optimization that can be done on your own
direct channels such as your website and social media to increase organic
performance in search rankings; and the better you rank, the more likely
guests are to find you and book directly. Link building is an important
component of SEO and by listing your hotel on different distribution
channels, you can increase your visibility. Increased visibility is like a
domino effect that can thereby lead to more bookings.

13. Think long-term

It’s easy to get caught up in the day-to-day operations of a hotel, but one of
the most important things you can do as a hotelier is to make sure to plan for
not only the short term but also the long term. Set goals and establish the
activities you need to do in the short, medium and long term to see that those
goals are accomplished. Having a clear idea of the big picture keeps you
from getting caught up in less strategic decisions that won’t necessarily help
your hotel in the long term.

14. Use technology to your favor

Technology is your friend and be sure to use available tools such as those
provided by Mews’ revenue management software, and other market data
that can be used to price rooms better. Machine learning and algorithms can
help you optimize prices and thereby achieve the most revenue per available
room. You can also use rate shoppers and other tools that will help you keep
better track of market trends and dynamics.
 6- Conclusion:

➢ A successful hotel needs to have a diversified revenue model. The

preceding profit margin analysis highlighted the profit potential of
hotel rooms. Subsequent to bed sales, that profit is only credible if
rooms are sold. The key is to find ways of generating additional
income streams that are not dependent on the success or failure of
your core business, and which can be easily adapted as circumstances
change.
➢ By putting into practice these tips you can ensure that your hotel gets
the room price, timing, and channel right for the right customer so
that you can maximize revenue, continue to grow, and stand out
against the competition.
➢ As mentioned, Revenue Management is not just about pricing. There
is much more than the rate of the rooms. It makes you consider
demand, budget, forecast, and everything else to make the most of
the opportunities and reservations.

➢ It’s not just the hotel room anymore, but also the added amenities and
everything that is included for a certain price point. Setting the right
rate is just the beginning.
 7- References

https://ideas.com/what-generates-largest-revenue-hotel/

https://duve.com/hotel-revenue-management-strategies/

https://www.cvent.com/en/blog/hospitality/hotel-revenue-
generating-ideas

https://www.hotelminder.com/what-is-hotel-revenue-
management

https://www.mews.com/en/blog/hotel-revenue-management-
strategies